The Government has provided an update about who will be affected by planned tax increases. Chancellor Rachel Reeves announced several takes hikes in her Autumn Budget.
This included a new cap on salary sacrifice, meaning you can only pay in up to £2,000 a year without paying National Insurance on your contributions. The Chancellor also confirmed the personal allowance and income tax thresholds will remain at their current levels beyond 2028, meaning people will pay more tax as their income increases.
Labour had previously said it would un-freeze the tax thresholds from April 2028. In light of the new policies, Conservative MP Wendy Morton asked the Government what estimate had been made of the average tax increase for households earning between £25,000 and £50,000, as a result of the policies.
Treasury minister Dan Tomlinson provided a response from Labour. He said the Treasury had published an ‘Impact on households’ publication alongside the Budget. He said this report showed that “the impact of Government tax, welfare and public service spending decisions from Autumn Budget 2024 onwards are progressive and benefit households in the lowest income deciles the most”.
He also said that the tax increases being brought in were “concentrated on the highest income households”. He added: “On average, all but the richest 10 percent of households will benefit from policy decisions in 2028-29”.
Labour announced some policies in the Budget that will benefit many households. Rail fares in England will be frozen for a year from March 1, 2026, as well NHS presciption charges for a year in England, from April 1, 2026.
The Government is also scrapping the two-child cap on benefits, which limits the extra amounts you can get through Universal Credit and Child Tax Credits to the first two children. This will be removed from the start of the new tax year, on April 6, 2026.
The National Living Wage is also increasing from April 1 next year, increasing for those aged 21 and over from £12.21 an hour to £12.71 an hour. For those aged 18 and 20, the wage is going up from £10 an hour to £10.85 an hour, while the rate for under 18s is going up from £7.55 an hour to £8 an hour, as is the apprentice rate.
Labour also confirmed the triple lock will apply again next April, lifting the state pension by 4.8 percent. The triple lock ensures the state pension goes up in line with whichever is highest: the rise in average earnings, inflation or 2.5 percent.
